Search results for: option to shut down and restart

Authors: Miroslav Čulík, Petr Gurný

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This paper is aimed at the financial assessment of the hard coal mining in a given region by real option methodology application. Hard coal mining in this mine makes net loss for the owner during the last years due to the long-term unfavourable mining conditions and significant drop in the coal prices during the last years. Management is going to shut down the operation and abandon the project to reduce the loss of the company. The goal is to assess whether the shutting down the operation is the only and correct solution of the problem. Due to the uncertainty in the future hard coal price evolution, the production might be again restarted if the price raises enough to cover the cost of the production. For the assessment, real option methodology is applied, which captures two important aspect of the financial decision-making: risk and flexibility. The paper is structured as follows: first, current state is described and problem is analysed. Next, methodology of real options is described. At last, project is evaluated by applying real option methodology. The results are commented and recommendations are provided.

Keywords: real option, investment, option to abandon, option to shut down and restart, risk, flexibility

Procedia PDF Downloads 515

Authors: Md. Mizanur Rahman, Chu Chi Ming, Mohd Suffian Bin Misaran

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Chimney is an important part of the industries to remove waste heat from the processes side to the atmosphere. The increased demand of energy helps to restart to think about the efficiency of chimney as well as to find out a valid option to replace forced draft chimney system from industries. In this study natural draft chimney model is air flow rate; exit air temperature and pressure losses are studied through modification with wire mesh screen and compare the results with without wire mesh screen chimney model. The heat load is varies from 0.1 kW to 1kW and three different wire mesh screens that have pore size 0.15 mm2, 0.40 mm2 and 4.0 mm2 respectively are used. The experimental results show that natural draft chimney model with wire mesh screens significantly restored the flow losses compared to the system without wire mesh screen. The natural draft chimney model with 0.40 mm2 pore size wire mesh screen can minimize the draft losses better than others and able to enhance velocity about 54 % exit air temperature about 41% and pressure loss decreased by about 20%. Therefore, it can be decided that the wire mesh screens significantly minimize the draft losses in the natural draft chimney and 0.40 mm2 pore size screen will be a suitable option.

Keywords: natural draft dhimney, wire mesh screen, natural draft flow, mechanical engineering

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Authors: Changhong Guo, Shaomei Fang, Yong He

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In this paper, fractional Black-Scholes models for the European option pricing were established based on the fractional G-Brownian motion (fGBm), which generalizes the concepts of the classical Brownian motion, fractional Brownian motion and the G-Brownian motion, and that can be used to be a tool for considering the long range dependence and uncertain volatility for the financial markets simultaneously. A generalized fractional Black-Scholes equation (FBSE) was derived by using the Taylor’s series of fractional order and the theory of absence of arbitrage. Finally, some explicit option pricing formulas for the European call option and put option under the FBSE were also solved, which extended the classical option pricing formulas given by F. Black and M. Scholes.

Keywords: European option pricing, fractional Black-Scholes equations, fractional g-Brownian motion, Taylor's series of fractional order, uncertain volatility

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Authors: Audie Daniel Wood

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In the spring of 2020, the country and the economy came to a halt due to an outbreak of the novel coronavirus, SARS-2, virus known as COVID-19. One of the hardest hit sectors of the economy was the gig-sector, which includes Lyft, Uber, Door-Dash, and other services. In this study, we examined the effects of the independent contractor status of laborers in this field to see how a near-complete economic shut-down affected the lives of laborers who are denied access to health-care and unemployment benefits due to their status as independent contractors. What the study found was there was no 'life-altering' change to the lives of the workers who used gig-work as supplementary income during the economic shut-down, but those who relied on Lyft and Uber, etc. as their sole source of income were more heavily impacted by the economic shut-down than part-time workers. The second significant finding of the study was that across all genders and races, the idea of having to seek unemployment or help was something that none of the workers wanted. They all felt as if unemployment and social-insurance were for those who could not work. While the findings are not generalizable due to this being a small qualitative study consisting of 27 participants, the findings suggest that the economic and social impact of COVID-19 on those that work in the gig-industry warrants further discussion and research.

Keywords: gig-work, Covid-19, independent contractor, Uber

Procedia PDF Downloads 93

Authors: H. D. Ibrahim, H. C. Chinwenyi, T. Danjuma

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An option is defined as a financial contract that provides the holder the right but not the obligation to buy or sell a specified quantity of an underlying asset in the future at a fixed price (called a strike price) on or before the expiration date of the option. This paper examined two approaches for derivation of Partial Differential Equation (PDE) options price valuation formula for the Heston stochastic volatility model. We obtained various PDE option price valuation formulas using the riskless portfolio method and the application of Feynman-Kac theorem respectively. From the results obtained, we see that the two derived PDEs for Heston model are distinct and non-unique. This establishes the fact of incompleteness in the model for option price valuation.

Keywords: Black-Scholes partial differential equations, Ito process, option price valuation, partial differential equations

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Authors: H. C. Chinwenyi, H. D. Ibrahim, F. A. Ahmed

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In modern financial mathematics, valuing derivatives such as options is often a tedious task. This is simply because their fair and correct prices in the future are often probabilistic. This paper examines three different Stochastic Differential Equation (SDE) models in finance; the Constant Elasticity of Variance (CEV) model, the Balck-Karasinski model, and the Heston model. The various Martingales option price valuation formulas for these three models were obtained using the replicating portfolio method. Also, the numerical solution of the derived Martingales options price valuation equations for the SDEs models was carried out using the Monte Carlo method which was implemented using MATLAB. Furthermore, results from the numerical examples using published data from the Nigeria Stock Exchange (NSE), all share index data show the effect of increase in the underlying asset value (stock price) on the value of the European Put Option for these models. From the results obtained, we see that an increase in the stock price yields a decrease in the value of the European put option price. Hence, this guides the option holder in making a quality decision by not exercising his right on the option.

Keywords: equivalent martingale measure, European put option, girsanov theorem, martingales, monte carlo method, option price valuation formula

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Authors: Mimi Hafizah Abdullah, Hanani Farhah Harun, Nik Ruzni Nik Idris

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With the implied volatility as an important factor in financial decision-making, in particular in option pricing valuation, and also the given fact that the pricing biases of Leland option pricing models and the implied volatility structure for the options are related, this study considers examining the implied adjusted volatility smile patterns and term structures in the S&P/ASX 200 index options using the different Leland option pricing models. The examination of the implied adjusted volatility smiles and term structures in the Australian index options market covers the global financial crisis in the mid-2007. The implied adjusted volatility was found to escalate approximately triple the rate prior the crisis.

Keywords: implied adjusted volatility, financial crisis, Leland option pricing models, Australian index options

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Authors: Surjit Angra, Pooja Rani, Vinod Kumar

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In hydro power plant spiral casing and Stay ring is meant to guide the water flow to guide vane and runner. Spiral casing and Stay ring is subjected to static i.e. pressure load as well as fluctuating load acting on the structure due to water hammer effect in water conductor system. Finite element method has been used to calculate stresses on spiral casing and stay ring. These calculations were done for the maximum possible loading under operating condition "LC1 Quick Shut Down”. The design load is reached for the spiral casing and stay ring during the emergency closure of the guide apparatus "LC1 Quick Shut Down”. During this operation the forces from the head cover to the stay ring also reach their maximum.

Keywords: hydro-turbine, spiral casing, stay ring, structural analysis

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Authors: Ali Safdari-Vaighani

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Pricing financial contracts on several underlying assets received more and more interest as a demand for complex derivatives. The option pricing under asset price involving jump diffusion processes leads to the partial integral differential equation (PIDEs), which is an extension of the Black-Scholes PDE with a new integral term. The aim of this paper is to show how basket option prices in the jump diffusion models, mainly on the Merton model, can be computed using RBF based approximation methods. For a test problem, the RBF-PU method is applied for numerical solution of partial integral differential equation arising from the two-asset European vanilla put options. The numerical result shows the accuracy and efficiency of the presented method.

Keywords: basket option, jump diffusion, ‎radial basis function, RBF-PUM

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Authors: Sujing Wang, Song Wang, Jian Zhang, Qiang Xu

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Flaring emissions during abnormal operating conditions such as plant start-ups, shut-downs, and upsets in chemical process industries (CPI) are usually significant. Flare minimization can help to save raw material and energy for CPI plants, and to improve local environmental sustainability. In this paper, a systematic methodology based on plant-wide dynamic simulation is presented for CPI plant flare minimizations under abnormal operating conditions. Since off-specification emission sources are inevitable during abnormal operating conditions, to significantly reduce flaring emission in a CPI plant, they must be either recycled to the upstream process for online reuse, or stored somewhere temporarily for future reprocessing, when the CPI plant manufacturing returns to stable operation. Thus, the off-spec products could be reused instead of being flared. This can be achieved through the identification of viable design and operational strategies during normal and abnormal operations through plant-wide dynamic scheduling, simulation, and optimization. The proposed study includes three stages of simulation works: (i) developing and validating a steady-state model of a CPI plant; (ii) transiting the obtained steady-state plant model to the dynamic modeling environment; and refining and validating the plant dynamic model; and (iii) developing flare minimization strategies for abnormal operating conditions of a CPI plant via a validated plant-wide dynamic model. This cost-effective methodology has two main merits: (i) employing large-scale dynamic modeling and simulations for industrial flare minimization, which involves various unit models for modeling hundreds of CPI plant facilities; (ii) dealing with critical abnormal operating conditions of CPI plants such as plant start-up and shut-down. Two virtual case studies on flare minimizations for start-up operation (over 50% of emission savings) and shut-down operation (over 70% of emission savings) of an ethylene plant have been employed to demonstrate the efficacy of the proposed study.

Keywords: flare minimization, large-scale modeling and simulation, plant shut-down, plant start-up

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Authors: Bo Zhang, Ellen S. Wilschut, Dehlia M. C. Willemsen, Marieke H. Martens

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With the rapid development of intelligent transportation systems, automated platooning of trucks is drawing increasing interest for its beneficial effects on safety, energy consumption and traffic flow efficiency. Nevertheless, one major challenge lies in the safe transition of control from the automated system back to the human drivers, especially when they have been inattentive after a long period of highly automated driving. In this study, we investigated driver take-over time after a system initiated request to leave the platooning system Virtual Tow Bar in a non-critical scenario. 22 professional truck drivers participated in the truck driving simulator experiment, and each was instructed to drive under three experimental conditions before the presentation of the take-over request (TOR): driver ready (drivers were instructed to monitor the road constantly), driver not-ready (drivers were provided with a tablet) and eye-shut. The results showed significantly longer take-over time in both driver not-ready and eye-shut conditions compared with the driver ready condition. Further analysis revealed hand movement time as the main factor causing long response time in the driver not-ready condition, while in the eye-shut condition, gaze reaction time also influenced the total take-over time largely. In addition to comparing the means, large individual differences can be found especially in two driver, not attentive conditions. The importance of a personalized driver readiness predictor for a safe transition is concluded.

Keywords: driving simulation, highly automated driving, take-over time, transition of control, truck platooning

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Authors: Arnab Adhikari, Arnab Bisi

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Since the inception, the fashion apparel supply chain is facing the problem of high demand uncertainty. Often the demand volatility compels the corresponding supply chain member to incur substantial holding cost and opportunity cost in case of the overproduction and the underproduction scenario, respectively. It leads to an uncoordinated fashion apparel supply chain. There exist several scholarly works to achieve coordination in the fashion apparel supply chain by employing the different contracts such as the buyback contract, the revenue sharing contract, the option contract, and so on. Specially, the application of option contract in the apparel industry becomes prevalent with the changing global scenario. Exploration of existing literature related to the option contract reveals that most of the research works concentrate on the one direction demand adjustment i.e. either to match the demand upwards or downwards. Here, we present a holistic approach to coordinate a dyadic fashion apparel supply chain comprising one manufacturer and one retailer with the help of bidirectional option contract. We show a combination of wholesale price contract and bidirectional option contract can coordinate the under expanded supply chain. We also propose a framework that captures the variation of the apparel retailer’s order quantity and the apparel manufacturer’s production quantity with the changing exercise price for the different ranges of the option price. We analytically explore that corresponding cost parameters of the supply chain members along with the nature of demand distribution play an instrumental role in the coordination as well as the retailer’s ordering decision.

Keywords: fashion apparel supply chain, supply chain coordination, wholesale price contract, bidirectional option contract

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Authors: Amol Parikh

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The goal of this study is to understand the most preferred ways to spend time at an airport while waiting for a flight to board. Survey was done on 1639 people of the United States of America. In the overall data, it was found that majority people always preferred spending time doing something in their mobile phone. Second most preferred option was reading something, followed by wanting a companion to talk to or to eat/drink. Least preferred option was to eat/drink alone. Overall data was then filtered based on age, gender, income and urban density groups. Percentage of people wanting to use a mobile phone was highest in the age group of 18-24. People aged 45 and above chose reading as the most preferred option. In any of the ranges of income, gender or urban density using mobile phone was the most preferred option. Conclusion of this study is that introducing a mobile app to search for a companion at an airport to do like minded activity would get noticed by majority travelers and would be a business idea worth trying as wanting a companion to talk or eat/drink with is not the least preferred option.

Keywords: waiting for a flight, airport, mobile phone, companion

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Authors: Yousef S. Kh. S. Hashem

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Accurate estimation of initial gas in place (IGIP) plays an important factor in the decision to develop a gas field. One of the methods that are available in the industry to estimate the IGIP is material balance. This method required that the well has to be shut-in while pressure is measured as it builds to average reservoir pressure. Since gas demand is high and shut-in well surveys are very expensive, flowing gas material balance (FGMB) is sometimes used instead of material balance. This work investigated the effect of reservoir properties (pressure, permeability, and reservoir size) on the estimation of IGIP when using FGMB. A gas reservoir simulator that accounts for friction loss, wellbore storage, and the non-Darcy effect was used to simulate 165 different possible causes (3 pressures, 5 reservoir sizes, and 11 permeabilities). Both tubing pressure and bottom-hole pressure were analyzed using FGMB. The results showed that the FGMB method is very sensitive for tied reservoirs (k < 10). Also, it showed which method is best to be used for different reservoir properties. This study can be used as a guideline for the application of the FGMB method.

Keywords: flowing material balance, gas reservoir, reserves, gas simulator

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Authors: Muhammad Sheraz, Vasile Preda, Silvia Dedu

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Concepts of econophysics are usually used to solve problems related to uncertainty and nonlinear dynamics. In the theory of option pricing the risk neutral probabilities play very important role. The application of entropy in finance can be regarded as the extension of both information entropy and the probability entropy. It can be an important tool in various financial methods such as measure of risk, portfolio selection, option pricing and asset pricing. Gulko applied Entropy Pricing Theory (EPT) for pricing stock options and introduced an alternative framework of Black-Scholes model for pricing European stock option. In this article, we present solutions to maximum entropy problems based on Tsallis, Weighted-Tsallis, Kaniadakis, Weighted-Kaniadakies entropies, to obtain risk-neutral densities. We have also obtained the value of European call and put in this framework.

Keywords: option pricing, Black-Scholes model, Tsallis entropy, Kaniadakis entropy, weighted entropy, risk-neutral density

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Authors: Manas Shah

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Black Scholes option pricing model is one of the most important concepts in modern world of computational finance. However, its practical use can be challenging as one of the input parameters must be estimated; implied volatility of the underlying security. The more precisely these values are estimated, the more accurate their corresponding estimates of theoretical option prices would be. Here, we present a novel model based on Cuckoo Search Optimization (CS) which finds more precise estimates of implied volatility than Particle Swarm Optimization (PSO) and Genetic Algorithm (GA).

Keywords: black scholes model, cuckoo search optimization, particle swarm optimization, genetic algorithm

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Authors: Ali Göksenli, Barlas Eryürek

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In this study, failure analysis of pipe system at a micro hydroelectric power plant is investigated. Failure occurred at the pipe system in the powerhouse during shut down operation of the water flow by a valve. This locking had caused a sudden shock wave, also called “Water-hammer effect”, resulting in noise and inside pressure increase. After visual investigation of the effect of the shock wave on the system, a circumference crack was observed at the pipe flange weld region. To establish the reason for crack formation, calculations of pressure and stress values at pipe, flange and welding seams were carried out and concluded that safety factor was high (2.2), indicating that no faulty design existed. By further analysis, pipe system and hydroelectric power plant was examined. After observations it is determined that the plant did not include a ventilation nozzle (air trap), that prevents the system of sudden pressure increase inside the pipes which is caused by water-hammer effect. Analyses were carried out to identify the influence of water-hammer effect on inside pressure increase and it was concluded that, according Jowkowsky’s equation, shut down time is effective on inside pressure increase. The valve closing time was uncertain but by a shut down time of even one minute, inside pressure would increase by 7.6 bar (working pressure was 34.6 bar). Detailed investigations were also carried out on the assembly of the pipe-flange system by considering technical drawings. It was concluded that the pipe-flange system was not installed according to the instructions. Two of five weld seams were not applied and one weld was carried out faulty. This incorrect and inadequate weld seams resulted in; insufficient connection of the pipe to the flange constituting a strong notch effect at weld seam regions, increase in stress values and the decrease of strength and safety factor

Keywords: failure analysis, hydroelectric plant, crack, shock wave, welding seam

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Authors: Guillaume Leduc

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In this paper, we describe a broad setting under which the error of the approximation can be quantified, controlled, and for which convergence occurs at a speed of n⁻¹ for European and American options. We describe how knowledge of the error allows for arbitrarily fast acceleration of the convergence.

Keywords: random walk approximation, European and American options, rate of convergence, option pricing

Procedia PDF Downloads 426

Authors: Mesbah Tarek, Kelaiaia Samia, Chiheb Sofien, Kelaiaia Mounia Samira, Labar Hocine

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As every power systems short circuit failure can occur for HVDC at the DC link. So, the power devices should be protected against over heath produced by this over-current. This can be achieved through the power switchers or fast breaker. After short circuit the system is unable to restart, only after a time delay, because of the potential distribution along the DC link line. An appropriate fast and safety control is proposed and tested successfully. The detailed development and discussion of these faults is presented in this paper.

Keywords: HVDC, DC link, switchers, short circuit, faults

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Authors: Seungmin Chee

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This paper investigates which of the two arguments, conservatism or liquidation option, is a true underlying driver of the asymmetric slope coefficient result regarding the association between earnings and returns. The analysis of the relation between earnings and returns in four mutually exclusive settings segmented by ‘profits vs. losses’ and ‘positive returns vs. negative returns’ suggests that liquidation option rather than conservatism is likely to cause the asymmetric slope coefficient result. Furthermore, this paper documents the temporal changes between Basu period (1963-1990) and post-Basu period (1990-2005). Although no significant change in degree of conservatism or value relevance of losses is reported, stronger negative relation between losses and positive returns is observed in the post-Basu period. Separate regression analysis of each quintile based on the rankings of price to sales ratio and book to market ratio suggests that the strong negative relation is driven by growth firms.

Keywords: conservatism, earnings, liquidation option, returns

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Authors: W. T. A. Mohammed, M. Eltaeb, R. Kashani

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The first bending modes of tall asymmetric structures in the two lateral X and Y-directions have two different natural frequencies. To add tuned damping to these bending modes, one needs to either a) use two pendulum-tuned mass dampers (PTMDs) with one tuning frequency, each PTMD targeting one of the bending modes, or b) use one PTMD with two tuning frequencies (one in each lateral directions). Option (a), being more massive, requiring more space, and being more expensive, is less attractive than option (b). Considering that the tuning frequency of a pendulum depends mainly on the pendulum length, one way of realizing option (b) is by constraining the swinging length of the pendulum in one direction but not in the other; such PTMD is dubbed passive Bi-PTMD. Alternatively, option (b) can be realized by actively setting the tuning frequencies of the PTMD in the two directions. In this work, accurate physical models of passive Bi-PTMD and active PTMD are developed and incorporated into the numerical model of a tall asymmetric structure. The model of PTMDs plus structure is used for a)synthesizing such PTMDs for particular applications and b)evaluating their damping effectiveness in mitigating the dynamic lateral responses of their target asymmetric structures, perturbed by wind load in X and Y-directions. Depending on how elaborate the control scheme is, the active PTMD can either be made to yield the same damping effectiveness as the passive Bi-PTMD of the same size or the passive Bi-TMD twice as massive as the active PTMD.

Keywords: active tuned mass damper, high-rise building, multi-frequency tuning, vibration control

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Authors: Abraham Castro-Alvarez, Luisaldo Sandate-Flores, Roberto Parra-Saldivar

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The losing of crops during the whole production process is a problem that is affecting farmers in the whole world, as climate change affects the weather behavior. Stenocereus spp. is a tropical, exotic and endemic columnar cacti, it produces a colored and expensive fruit known how “pitaya”. The quality and value of the fruit, these species represent an attractive option for economical development in arid and semi-arid regions. This fruits are produced in Mexico, mainly in 4 regions, Mixteca Oaxaca-Puebla, Michoacan, Sinaloa-Sonora, Jalisco-Zacatecas. Pitaya can be an option to try mixed crop in this states due to the resistance to hard weather conditions. And also because of the marginalization problems that exist in these townships. As defined by the Population National Council it consists in the absence of development opportunities and the lack of capacity to get them. According to an analysis done in EsriPress ArcGis 10.1 the potential area in the country is almost the half of the territory being the total area of Mexico 1,965,249 km2 and the area with potential to produce pitaya 960,527 km2. This area covers part of the most affected townships that also have a few options of maize varieties making even harder the production of maize and exposing farmers to crop losing if conditions are good enough. Making pitaya a good option for these farmers to have an economic backup in their productions.

Keywords: maize, pitaya, rain fed, Stenocereus

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Authors: Luca Lezzerini

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Albania is suffering a continuous shrinking of its population and demographic distribution that faces all the problems connected with age increase. The paper examines the case of Gjirokastër, a city in the south of Albania that, despite having a UNESCO label as a world heritage site, is experimenting with the same shrinking phenomenon. The paper analyses in detail the current situation and propose an interdisciplinary approach based on smart technologies and sunset tourism to restart Gjirokastër’s economy and invert bad demographic trends. The proposed approach needs to review the current urban planning, reshaping and connecting some areas. It also proposes a smart city architecture to support this process.

Keywords: smart city, sunset tourism, shrinking city, Gjirokastër

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Authors: Young Yoon, Jinsoo Kim

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The adoption of information and communication technologies (ICT) in all industry is growing under industry 4.0. Many oil companies also are increasingly adopting ICT to improve the efficiency of existing operations, take more accurate and quicker decision making and reduce entire cost by optimization. It is true that ICT is playing an important role in the process of unconventional oil and gas development and companies must take advantage of ICT to gain competitive advantage. In this study, real option approach has been applied to Unconventional gas R&D project to evaluate ICT of them. Many unconventional gas reserves such as shale gas and coal-bed methane(CBM) has developed due to technological improvement and high energy price. There are many uncertainties in unconventional development on the three stage(Exploration, Development, Production). The traditional quantitative benefits-cost method, such as net present value(NPV) is not sufficient for capturing ICT value. We attempted to evaluate the ICT valuation by applying the compound option model; the model is applied to real CBM project case, showing how it consider uncertainties. Variables are treated as uncertain and a Monte Carlo simulation is performed to consider variables effect. Acknowledgement—This work was supported by the Energy Efficiency & Resources Core Technology Program of the Korea Institute of Energy Technology Evaluation and Planning (KETEP) granted financial resource from the Ministry of Trade, Industry & Energy, Republic of Korea (No. 20152510101880) and by the National Research Foundation of Korea Grant funded by the Korean Government (NRF-205S1A3A2046684).

Keywords: information and communication technologies, R&D, real option, unconventional gas

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Authors: Salah Alrabeei, Mohammad Yousuf

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The goal of option pricing theory is to help the investors to manage their money, enhance returns and control their financial future by theoretically valuing their options. However, most of the option pricing models have no analytical solution. Furthermore, not all the numerical methods are efficient to solve these models because they have nonsmoothing payoffs or discontinuous derivatives at the exercise price. In this paper, we solve the American option under jump diffusion models by using efficient time-dependent numerical methods. several techniques are integrated to reduced the overcome the computational complexity. Fast Fourier Transform (FFT) algorithm is used as a matrix-vector multiplication solver, which reduces the complexity from O(M2) into O(M logM). Partial fraction decomposition technique is applied to rational approximation schemes to overcome the complexity of inverting polynomial of matrices. The proposed method is easy to implement on serial or parallel versions. Numerical results are presented to prove the accuracy and efficiency of the proposed method.

Keywords: integral differential equations, jump–diffusion model, American options, rational approximation

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Authors: Anitha Narasimhan, Aarthy Anandan, Madhan Karky, C. N. Subalalitha

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Games can be the excellent tools for teaching a language. There are few e-learning games in Indian languages like word scrabble, cross word, quiz games etc., which were developed mainly for educational purposes. This paper proposes a Tamil word game called, “Porul”, which focuses on education as well as on players’ thinking and decision-making skills. Porul is a multiple choice based quiz game, in which the players attempt to answer questions correctly from the given multiple options that are generated using a unique algorithm called the Option Selection algorithm which explores the semantics of the question in various dimensions namely, synonym, rhyme and Universal Networking Language semantic category. This kind of semantic exploration of the question not only increases the complexity of the game but also makes it more interesting. The paper also proposes a Scoring Algorithm which allots a score based on the popularity score of the question word. The proposed game has been tested using 20,000 Tamil words.

Keywords: Porul game, Tamil word game, option selection, flash card, scoring, algorithm

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Authors: T. J. B. van Niekerk, J. Viviers, E. J. Cilliers

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Substantial efforts were made in South Africa, stemming from a historic political change in 1994, to remedy the inequality and injustice, resulting from a dispensation where spatial patterns were largely based on racial segregation. Spatially distorted patterns predominantly originated from colonialism in the beginning of the twentieth century, ensuing a physical imprint on South African cities relating to architecture, urban layout and planning, frequently reflecting European norms and standards. As a consequence of physical and land use barriers, and well-established dual cities, attempts to address spatial injustices, apart from limited occurrences in metropolitan areas, gravely failed. Interception of incessant segregated growth, combined with urban sprawl is becoming increasingly evident. Intervention is a prerequisite to duly address the impact of colonial planning and its legacy still prevalent in most urban areas. During 1998, the National Department of Transport prepared the “Moving South Africa” strategy; presenting the Corridor Densification Option Model for the first time, as it was deemed more fitting to the existing South African urban tenure patterns than more familiar planning approaches. Urban planners are progressively contemplating the Corridor Densification Option Model and its attributes, besides its transportation emphasis, as an alternative approach to address spatial imbalances and to attain the physical integration of contemporary urban forms. In attaining a clearer understanding of the Corridor Densification Option Model, its rationale was analysed in greater detail. This research further investigated the provisional applications of the model in spatially segregated cities and illustrated that viable options are present to effectively employ it. Research revealed that the application of the model will, however, be dependent on the occurrence of specific characteristics in spatially segregated cities to warrant augmentation thereof.

Keywords: corridor densification option model, spatially segregated settlements, integration, urban restructuring

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Authors: Sanjay Kumar Parjapati, Ajai Jain

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This paper presents optimization of makespan for ‘n’ jobs and ‘m’ machines flexible job shop scheduling problem with sequence dependent setup time using genetic algorithm (GA) approach. A restart scheme has also been applied to prevent the premature convergence. Two case studies are taken into consideration. Results are obtained by considering crossover probability (pc = 0.85) and mutation probability (pm = 0.15). Five simulation runs for each case study are taken and minimum value among them is taken as optimal makespan. Results indicate that optimal makespan can be achieved with more than one sequence of jobs in a production order.

Keywords: flexible job shop, genetic algorithm, makespan, sequence dependent setup times

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Authors: Jingwen Shi, Qi Wu

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We study the role played interest rate risk in carry trade return in order to understand the forward premium puzzle. In this study, our goal is to investigate to what extent carry trade return is indeed due to compensation for risk taking and, more important, to reveal the nature of these risks. Using option data not only on exchange rates but also on interest rate swaps (swaptions), our first finding is that, besides the consensus currency risks, interest rate risks also contribute a non-negligible portion to the carry trade return. What strikes us is our second finding. We find that large downside risks of future exchange rate movements are, in fact, priced significantly in option market on interest rates. The role played by interest rate risk differs structurally from the currency risk. There is a unique premium associated with interest rate risk, though seemingly small in size, which compensates the tail risks, the left tail to be precise. On the technical front, our study relies on accurately retrieving implied distributions from currency options and interest rate swaptions simultaneously, especially the tail components of the two. For this purpose, our major modeling work is to build a new international asset pricing model where we use an orthogonal setup for pricing kernels and specify non-Gaussian dynamics in order to capture three sets of option skew accurately and consistently across currency options and interest rate swaptions, domestic and foreign, within one model. Our results open a door for studying forward premium anomaly through implied information from interest rate derivative market.

Keywords: carry trade, forward premium anomaly, FX option, interest rate swaption, implied volatility skew, uncovered interest rate parity

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Authors: Olga Biedova, Victoria Steblovskaya, Kai Wallbaum

Abstract:

In the current capital market environment, investors constantly face the challenge of finding a successful and stable investment mechanism. Highly volatile equity markets and extremely low bond returns bring about the demand for sophisticated yet reliable risk management strategies. Investors are looking for risk management solutions to efficiently protect their investments. This study compares a classic Constant Proportion Portfolio Insurance (CPPI) strategy to a Volatility Target portfolio insurance (VTPI). VTPI is an extension of the well-known Option Based Portfolio Insurance (OBPI) to the case where an embedded option is linked not to a pure risky asset such as e.g., S&P 500, but to a Volatility Target (VolTarget) portfolio. VolTarget strategy is a recently emerged rule-based dynamic asset allocation mechanism where the portfolio’s volatility is kept under control. As a result, a typical VTPI strategy allows higher participation rates in the market due to reduced embedded option prices. In addition, controlled volatility levels eliminate the volatility spread in option pricing, one of the frequently cited reasons for OBPI strategy fall behind CPPI. The strategies are compared within the framework of the stochastic dominance theory based on numerical simulations, rather than on the restrictive assumption of the Black-Scholes type dynamics of the underlying asset. An extended comparative quantitative analysis of performances of the above investment strategies in various market scenarios and within a range of input parameter values is presented.

Keywords: CPPI, portfolio insurance, stochastic dominance, volatility target

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